Every deduction on a Canadian paycheque, explained (2026)
A Canadian paystub carries four to six deductions, and two of them changed shape in recent years, which is why calculators disagree and payslips surprise people.
Federal income tax
2026 brackets run 14% (cut from 15%) to $58,523, then 20.5%, 26%, 29% and 33% above $258,482. Everyone gets credits worth 14% of the basic personal amount ($16,452, which phases down from $181,440 to $258,482 of net income, reaching $14,829) plus the $1,501 employment amount and your CPP/EI premiums, which is why real tax starts far above zero income.
Provincial tax
Each province layers its own brackets and credits on the same taxable income. The spread is large: Alberta exempts the first $22,769 while Nova Scotia exempts $11,932; Ontario adds a surtax of 20% of provincial tax above $5,818 plus 36% above $7,446 (56% combined at the top), plus a Health Premium of up to $900. Quebec runs a fully separate return with its own brackets, a workers' deduction, and a 16.5% abatement on federal tax.
CPP and CPP2: part credit, part deduction
You pay 5.95% on earnings between $3,500 and $74,600 (max $4,230), and since 2024 a second 4% tier (CPP2) up to $85,000 (max $416). The subtlety: the "base" 4.95% earns a tax credit, while the enhanced 1% and all of CPP2 are income deductions, and calculators that treat it all one way drift by real dollars. Quebec's QPP runs at 6.30% in 2026.
EI, and Quebec's extras
EI is 1.63% up to $68,900 of insurable earnings (max $1,123). Quebec residents pay a reduced 1.30% because the province runs its own parental insurance, QPIP, at 0.430%, which some calculators still charge at the old 2025 rate.
The one lever on every paystub: RRSP
RRSP contributions (limit $33,810 for 2026) reduce both federal and provincial taxable income at your marginal rate: at $90,000 in BC, a 10% contribution costs far less in take-home than its face value. See the effect live in the Canada salary calculator, or jump to your number, e.g. $60,000 after tax by province.
Frequently asked questions
What is CPP2 and how does it differ from regular CPP?
CPP2 is a second-tier Canada Pension Plan contribution, introduced in 2024, on earnings above the regular CPP maximum up to a higher ceiling. Unlike base CPP, CPP2 premiums are an income deduction rather than a non-refundable tax credit, which affects how each appears in your tax return.
Why do Quebec residents pay a lower EI rate than other Canadians?
Quebec operates its own parental insurance plan (QPIP), which covers maternity and parental benefits provided by EI elsewhere in Canada. Because QPIP replaces part of EI coverage, Quebec employees pay a reduced federal EI premium rate.
How does an RRSP contribution reduce my taxes?
RRSP contributions are deducted from taxable income at your marginal rate, reducing both federal and provincial tax. The higher your marginal rate, the more tax each contributed dollar saves, up to your personal RRSP deduction limit.
Sources: CRA T4127 (122nd edition, January 2026, and 123rd edition, July 2026), ESDC EI rates 2026, Québec 2026 parameters. Last updated 2026-11-04.